U.S. Stocks Soar to New All-Time Highs; 30-Year Bonds Auctioned at 3.152%

It was a quiet day on Tuesday as far as U.S. economic data is concerned. The November read on the NFIB Small Business Index came in at 93.4, above the October read of 94.9. The government also reported that import prices for November fell 0.3 percent.

The Fed began its two day meeting, which is likely to culminate with a 25-basis point rate hike on Wednesday. However, the key concern for U.S. Dollar and Treasury debt investors will be the Fed’s projections for future rate hikes.

U.S. Treasurys

There was an important bond auction on Tuesday. The U.S. Treasury Department auctioned $12 billion of 30-year bonds at a high yield of 3.152%. The results caused a mixed reaction in the markets. The 2-year U.S. Treasury yield was trading 1.162, up 0.021. U.S. 10-year Treasury note yield was 2.470, down 0.009. Finally, the U.S. 30-year Treasury bond was yielding 3.142, down 0.02.

U.S. Equities

U.S. stocks were higher on Tuesday as the Dow Jones Industrial Average neared the 20,000 level. The Dow hit a new intraday high shortly after the opening, rising more than 100 points. The S&P 500 Index also hit a new intraday record. The 0.7 percent rally was boosted by a strong showing from information technology stocks.  This buying carried over to the NASDAQ Composite, which outperformed the other indexes, rising 1.3 percent to a new all-time high.

 Crude Oil

Crude oil prices were higher on Tuesday, buoyed by strong demand in Asia and supply cuts by Abu Dahbi, Kuwait and Qatar as part of the output cuts coordinated by OPEC and major non-member producers.

North Sea Brent was trading $55.88, up $0.19, while U.S. West Texas Intermediate crude oil was up 20 cents at $53.03.

Despite the gains, the market remained well below yesterday’s high at $56.24 that was formed by a wave of profit-takers on Monday. The general consensus is that a good foundation has been laid, but that the market could turn down quickly if investors sense non-compliance with the plan.

Forex

The U.S. Dollar Index was flat as nervous traders took to the sidelines ahead of the Fed’s interest rate and monetary policy announcements on Wednesday. Traders aren’t worried about the rate hike. It’s been priced in for about two weeks, but they are concerned over the pace of future rate hikes.

The EUR/USD traded flat to lower after Germany’s Consumer Inflation data came in as expected. The GBP/USD was marginally higher after the market spiked higher following the release of higher-than-expected Consumer Inflation data. However, investors still expect the Bank of England to leave interest rates unchanged on Thursday.